A Big Turnaround In Management Thinking: New Leadership Competencies For VUCA

The annual Global Peter Drucker Forum has become the management conference of the year. It is dubbed the “Davos” of Management Conferences and features the “Who’s Who” of management thinkers. It is a result of Richard Straub’s conviction and tireless efforts to continue the legacy of Peter Drucker (1909-2005). Drucker led the management forefront at the cutting edge back then, and has become even more relevant now.

I had the great honor of speaking at the Forum this past November. Here are the three big management trends I observed at the 10th annual GPDF, which I hope will inform and benefit leaders and management scholars around the globe.

A changing basis of competition

Successful leadership is defined by how well s/he delivers on the basis of competition of the day, which in turn depends on the business environment. In the post-Industrial era, the environment was stable. What made companies successful—the basis of competition—was how efficiently they produced physical goods. They knew what output they had to produce, and those who produced the output most cheaply won, because not much changed between the input and the output. It gave rise to management tools such as bureaucracy, time and motion studies, the Balanced Score Card, Linear Programming, Six Sigma, and Enterprise Resource Planning. All of these tools were designed to improve efficiency, solving for known variables in a stable business environment. In the process, each business had to optimize all inputs, including raw materials, equipment, and even people. But today’s environment has become a lot more VUCA (volatile, uncertain, complex and ambiguous) and the basis of competition has changed from efficiency to learning and innovation (for more on this, see my previous post here). Any organism who doesn’t change as fast as its environment faces extinction.

Employed people work in the food industry for packaging frozen foods.Getty

Return to humanity

To deliver on the Industrial-era mantra of efficiency and standardization, we dehumanized people. Corporate Legal departments have systematically attempted to eliminate all elements of emotions and touch in the workplace, because they are messy, unpredictable legal liabilities. As result, the workplace has become sterile: void of human connection. However, the best way to deliver on the new basis of competition—learning and innovation—is through trial and error, diversity of thought, and self-organization, all of which require unleashing our human potential as unique, idiosyncratic thinkers with diverse perspectives.

Today’s workplace requires us to respect workers as individuals, and trust them to respond to unforeseen environmental perturbations. Rather than be supervised and micromanaged by those who are disconnected from the realities of the real-time situation, we need them to respond to unpredictable changes in the rapidly changing environment. We can no longer succeed by squeezing the last drop of productivity from people to efficiently produce error-free predetermined output. Things on the ground are changing too quickly; what we measure and control today may be completely irrelevant tomorrow.

Winning in the new environment compels us to reclaim human connection in the workplace. We need to allow workers to think for themselves so they create a self-healing, adaptive organization, complete with idiosyncrasies and imperfect trials. We must allow ourselves and our employees to be the amazing learning machines we are meant to be. All the recent trends in employee engagement, employee experience management, and humanistic workplace (read: no more jerk bosses) are the result of this realization.

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Raise the bar

For the principles of self-organization to work, individuals must act in the best interest of the organization, even if it conflicts with their self-interest. For these principles to work in everyone’s best interest, we must practice trust, reciprocity, and ethical behavior for the greater good of the entire organization, and indeed the entire planet. It is no longer prudent to maximize short-term earnings by sacrificing employee morale, exploiting the environment, or crushing the competition with a zero-sum game mentality, because today’s leaders in VUCA must accept this inconvenient truth: attempts to control employees and situations at lower levels stifle innovation and often create unexpected negative results at higher levels (see my post here for more on this) disproportionate to the magnitude of the input. High moral and ethical standards in individual leaders and organizations, as well as nations, are needed now more than ever. Due to the long germination required for radical innovation, learning-driven innovation requires a long-term approach to earnings. Hence, a realignment of incentives between the board of directors, investors, and the firm’s management is likely required.

These takeaways from the 10th GPDF are relevant for leadership practitioners and scholars alike. Embrace these principles and produce radical innovation to lead tomorrow — or disappear into the sunset as dinosaurs of the bygone era.